People have been sharing goods and services with one another since the beginning of time, but it was not until recently that this age-old practice revealed itself a force of transformation for the economy. Disrupting traditional business practices and paving the way to a new era, the sharing economy shows no sign of slowing down. And while some are embracing it, others remain resistant.
Despite economic uncertainty caused by Brexit, the sharing economy is flourishing in the UK, according to a recent PwC analysis. Five of the UK’s biggest sharing economy sectors are expected to grow by as much as £8 billion this year alone.
Driven by an increasingly entrepreneurial and digitally literate population, the UK represents one of the fastest growing sharing economies in Europe, with transactions doubling year-on-year, from £3.9 billion in 2014 to £7.4 billion in 2015 and approximately £13 billion in 2016.
“Trust will continue to be the key sharing economy issue in 2017,” said PwC economist Rob Vaughn. “To tackle this, we expect platforms to implement proactive new forms of self-regulation this year. The interaction between the sharing economy and the tax system is also set to move into the spotlight, as the implications of legal cases become clearer. Policymakers will need to show a bold appetite to try new policy approaches and foster a spirit of collaboration between all stakeholders to find the right balance between protection and flexibility.”
Collaborative finance and peer-to-peer (P2P) accommodation constitute two of the largest markets in terms of volume of activity, accounting between them for over three-quarters of the UK’s total. Recent estimates highlight that the UK makeups up nearly 80 percent of Europe’s alternative finance market and at a city-level, London is now Airbnb’s third biggest city in terms of places to stay globally, and is the home to leaders in peer-to-peer accommodation including Onefinestay, who serve the luxury end of the market. But in terms of revenues, peer-to-peer transportation is the UK’s biggest sharing economy sector, capturing over a third of UK platform revenues, with short distance ride-hailing services such as Uber and car clubs such as Zipcar proving particularly popular.
Looking ahead, peer-to-peer transportation is expected to remain the largest sector of the UK sharing economy as measured by revenues, drive by urban ride-sharing apps and parking sharing platforms growing at over 35 percent.
However, it is on-demand household services that PwC says will be the fastest growing sharing economy sector, with revenues set to expand at roughly 45 percent a year to 2025. There is also a sizable growth opportunity for on-demand professional services — carried out by qualified experts — which PwC forecasts to expand by 40 percent per year to €20 billion of annual transactions in Europe by 2025.
Interestingly, PwC points to ‘silver surfers’ — or over 50’s — as the fastest growing user group for peer-to-peer platforms, including Airbnb and DogVacay.
By 2025, PwC forecasts that total transactions in the UK sharing economy could reach £140 billion.
Industries where cost pressures are mounting, such as healthcare and retail, have the most to gain from the sharing economy, PwC says, and some new models in these sectors such as MedZed and Heal in healthcare and Rent the Runway and Bag, Borrow or Steal in retail could make headways this year.
“Innovation will remain crucial to success in the sharing economy,” Vaughn added. “A number of established players branched out into new service offerings in 2016 and we expect them to invest significantly in these this year. The success of these new services will be an acid test of whether sharing economy platforms can eventually become the established leaders of their markets, or will forever be known as the ‘disruptors.’”
Meanwhile, Korea is taking a more reserved approach to the sharing economy — one that could create obstacles for growth.
Seoul mayor Park Won-soon is a strong proponent for P2P and wants to make the South Korean capital a global leader in the sharing economy, but actions speak louder than words. Foreign entry into the Korean market has proven to be an uphill battle.
Airbnb has faced pressure to delete accommodations the government considers illegal — which equates to approximately 70 percent of its listings nationwide — and is still in the midst of a court battle with the Korean government over brokering and cancellation fees.
Uber experienced a significant amount of pushback from local government and taxi unions as well, which ultimately resulted in founder Travis Kalanick being indicted.
While Park insists that startups are a crucial component of the success of Seoul’s free-market economy and should be welcomed, but he believes that they must follow the same rules.
In regards to Uber, the mayor said that the company refused to cooperate and that he “had no choice” but to uphold Korean laws. Uber was eventually able to come to a compromise with the government, but not until after KakaoTaxi, a taxi-hailing app created Korea’s mobile giant Kakao, had already asserted its place of dominance in the market.
The measures taken against foreign startups have been viewed as an example of Korean protectionism, but Park has denied these claims. Regulatory pushback against Airbnb has been attributed to ensuring basic sanitation, safety and taxes to protect consumers.
It appears though that Airbnb has learned from Uber’s past mistakes, having made considerable efforts to be compliant, including meeting with government on several occasions to negotiate.
Park envisions the sharing economy for Korea as “restoring a sense of community,” and supporting local startups. In 2012, he launched the Sharing City project to do just that. The project assists Korean startups like P2P accommodation provider BnbHero and car-sharing platform SoCar. However, the success of the program has largely been overshadowed by a dependence on government funds, a lack of successful role models and outdated federal regulations that aren't conducive to growth.